International Marketing
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Scope, Concepts, and Drivers of International Marketing Dana-Nicoleta Lascu Chapter 1
Copyright Atomic Dog Publishing, 2002
Chapter Objectives • Define international marketing and identify the different levels of international involvement. • Describe the different company orientations and philosophies toward international marketing. • Identify environmental and firm-specific drivers that direct firms toward international markets. • Identify obstacles preventing firms from engaging in successful international ventures.
Copyright Atomic Dog Publishing, 2002
Importance of International Marketing • International expansion helps firm:
Keep pace with competition Reach a larger market Reap higher profits Prolong the lifecycle of their products
Copyright Atomic Dog Publishing, 2002
Levels of International Marketing Domestic Marketing
Export Marketing
International Marketing
• Least international commitment
• Limited international commitment
• Domestic focus
• Involves direct • Focus on or indirect individual export countries or regions • Ethnocentric • Polycentric or Regiocentric
Copyright Atomic Dog Publishing, 2002
• Substantial international commitment
Global Marketing • Extensive international commitment • Focus on segments, rather than countries or regions • Geocentric
International Philosophy Human Resources
Marketing & Sales
Corporation & Business Lines
Manufacturing & Distribution
Copyright Atomic Dog Publishing, 2002
Finance
Management internationalization philosophy affects all functional areas of the corporation.
Ethnocentric Orientation • Guided by domestic market extension concept: • Domestic strategies, techniques, and personnel are perceived as superior • International customers are considered as secondary • International markets are regarded primarily as outlets for surplus domestic production • International marketing plans are developed in-house by the international division
Copyright Atomic Dog Publishing, 2002
Polycentric Orientation • Guided by the multidomestic market concept: • Focuses on the importance and uniqueness of each international market • Likely to establish businesses in each target country • Fully decentralized, minimal coordination with headquarters • Marketing strategies are specific to each country • Result: No economies of scale, duplicated functions, higher final product costs
Copyright Atomic Dog Publishing, 2002
Regiocentric Orientation • Guided by the global marketing concept: • World regions that share economic, political, and/or cultural traits are perceived as distinct markets • Divisions are organized based on location • Regional offices coordinate marketing activities
Copyright Atomic Dog Publishing, 2002
Geocentric Orientation • Guided by the global marketing concept: • The world is perceived as a total market with identifiable, homogenous segments • Targeted marketing strategies aimed at market segments, rather than geographic locations • Achieve position as low-cost manufacturer and marketer of product line • Provides standardized product or service throughout the world
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion • Competition • Regional Economic and Political Integration • Technology • Improvements in Transportation and Telecommunication • Economic Growth • Transition to Market Economy • Converging Consumer Needs
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued COMPETITION • McCann Erickson, the advertising agency, follows longtime client, Coke, to all countries where company is present
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued REGIONAL, ECONOMIC and POLITICAL INTEGRATION • Regional agreements such as NAFTA, MERCOSUR, and the European Union lower and eliminate barriers and promote trade within common markets. • Subsidiaries are established in specific markets to take advantage of free trade within the region.
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued TECHNOLOGY • Consumers worldwide are exposed to similar products, services, and entertainment. • The Web and the Internet have revolutionized the way companies conduct business. Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued TRANSPORTATION and TELECOMMUNICATIONS • Lower cost and higher quality communication due to satellite technology, teleconferencing, and e-mail • Efficient transportation due to containerization and just-in-time technology
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued ECONOMIC GROWTH
Copyright Atomic Dog Publishing, 2002
• Emerging middle class with increasing buying power in big emerging markets such as Brazil and India • Opening of new markets previously closed, such as the markets of China and Vietnam • Emerging economies are becoming viable trade partners
Drivers of International Expansion, continued TRANSITION to a MARKET ECONOMY • Transition of the Eastern Bloc to a market economy created important new markets • Created opportunities to transform inefficient government-owned local companies into successful enterprises
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued CONVERGING CONSUMER NEEDS • Uniform consumer segments emerging worldwide: global teenagers, global elite
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers Product Life Cycle Considerations: opportunity to prolong product lifecycle by entering growth markets. Intro
Sales
Growth
Maturity
Decline
Sales Profits
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued High New Product Development Costs: • Firm must look beyond home-country market to recover investment costs
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued Standardization, Scale Economies, Cheap Labor Price competition during maturity drives firm to new international markets Intro
Growth
Maturity
Sales
Decline
Sales
Profits
Time Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued Experience Transfers Experience in one country serves as basis for strategies in new international markets.
Copyright Atomic Dog Publishing, 2002
Obstacles to Internationalization • Self-reference Criterion
Conscious and unconscious reference to own national culture while operating in the host country To counter the impact of the self-reference criterion, the corporation must select appropriate personnel for international assignments and engage in sensitivity training
• Government Barriers
Restrictions placed on foreign corporations by imposing tariffs, import quotas, and other limitations, such as restrictive import license awards
Copyright Atomic Dog Publishing, 2002
Obstacles to Internationalization, continued • Barriers Imposed by International Competition
Blocked channels of distribution Exclusive retailer agreements Price reductions at the time of market entry Advertising blitzes
Copyright Atomic Dog Publishing, 2002
Chapter Summary • • •
•
•
International involvement: Domestic marketing, export marketing, international marketing and global marketing Internationalization philosophies: Ethnocentric, polycentric, regiocentric, and geocentric Drivers of international expansion: Competition, regional integration, removal of trade barriers, improvements in transportation, telecommunications and technology, and converging consumer needs Firm-specific drivers: Prolonging product lifecycle, recovering new product development costs, price competition, standardization, economies of scale and cheap labor, experience transfers Obstacles to entry: Self-reference criterion, government barriers, and competitive barriers
Copyright Atomic Dog Publishing, 2002
Copyright Atomic Dog Publishing, 2002
Chapter Objectives • Define international marketing and identify the different levels of international involvement. • Describe the different company orientations and philosophies toward international marketing. • Identify environmental and firm-specific drivers that direct firms toward international markets. • Identify obstacles preventing firms from engaging in successful international ventures.
Copyright Atomic Dog Publishing, 2002
Importance of International Marketing • International expansion helps firm:
Keep pace with competition Reach a larger market Reap higher profits Prolong the lifecycle of their products
Copyright Atomic Dog Publishing, 2002
Levels of International Marketing Domestic Marketing
Export Marketing
International Marketing
• Least international commitment
• Limited international commitment
• Domestic focus
• Involves direct • Focus on or indirect individual export countries or regions • Ethnocentric • Polycentric or Regiocentric
Copyright Atomic Dog Publishing, 2002
• Substantial international commitment
Global Marketing • Extensive international commitment • Focus on segments, rather than countries or regions • Geocentric
International Philosophy Human Resources
Marketing & Sales
Corporation & Business Lines
Manufacturing & Distribution
Copyright Atomic Dog Publishing, 2002
Finance
Management internationalization philosophy affects all functional areas of the corporation.
Ethnocentric Orientation • Guided by domestic market extension concept: • Domestic strategies, techniques, and personnel are perceived as superior • International customers are considered as secondary • International markets are regarded primarily as outlets for surplus domestic production • International marketing plans are developed in-house by the international division
Copyright Atomic Dog Publishing, 2002
Polycentric Orientation • Guided by the multidomestic market concept: • Focuses on the importance and uniqueness of each international market • Likely to establish businesses in each target country • Fully decentralized, minimal coordination with headquarters • Marketing strategies are specific to each country • Result: No economies of scale, duplicated functions, higher final product costs
Copyright Atomic Dog Publishing, 2002
Regiocentric Orientation • Guided by the global marketing concept: • World regions that share economic, political, and/or cultural traits are perceived as distinct markets • Divisions are organized based on location • Regional offices coordinate marketing activities
Copyright Atomic Dog Publishing, 2002
Geocentric Orientation • Guided by the global marketing concept: • The world is perceived as a total market with identifiable, homogenous segments • Targeted marketing strategies aimed at market segments, rather than geographic locations • Achieve position as low-cost manufacturer and marketer of product line • Provides standardized product or service throughout the world
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion • Competition • Regional Economic and Political Integration • Technology • Improvements in Transportation and Telecommunication • Economic Growth • Transition to Market Economy • Converging Consumer Needs
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued COMPETITION • McCann Erickson, the advertising agency, follows longtime client, Coke, to all countries where company is present
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued REGIONAL, ECONOMIC and POLITICAL INTEGRATION • Regional agreements such as NAFTA, MERCOSUR, and the European Union lower and eliminate barriers and promote trade within common markets. • Subsidiaries are established in specific markets to take advantage of free trade within the region.
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued TECHNOLOGY • Consumers worldwide are exposed to similar products, services, and entertainment. • The Web and the Internet have revolutionized the way companies conduct business. Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued TRANSPORTATION and TELECOMMUNICATIONS • Lower cost and higher quality communication due to satellite technology, teleconferencing, and e-mail • Efficient transportation due to containerization and just-in-time technology
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued ECONOMIC GROWTH
Copyright Atomic Dog Publishing, 2002
• Emerging middle class with increasing buying power in big emerging markets such as Brazil and India • Opening of new markets previously closed, such as the markets of China and Vietnam • Emerging economies are becoming viable trade partners
Drivers of International Expansion, continued TRANSITION to a MARKET ECONOMY • Transition of the Eastern Bloc to a market economy created important new markets • Created opportunities to transform inefficient government-owned local companies into successful enterprises
Copyright Atomic Dog Publishing, 2002
Drivers of International Expansion, continued CONVERGING CONSUMER NEEDS • Uniform consumer segments emerging worldwide: global teenagers, global elite
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers Product Life Cycle Considerations: opportunity to prolong product lifecycle by entering growth markets. Intro
Sales
Growth
Maturity
Decline
Sales Profits
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued High New Product Development Costs: • Firm must look beyond home-country market to recover investment costs
Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued Standardization, Scale Economies, Cheap Labor Price competition during maturity drives firm to new international markets Intro
Growth
Maturity
Sales
Decline
Sales
Profits
Time Copyright Atomic Dog Publishing, 2002
Firm-Specific Drivers, continued Experience Transfers Experience in one country serves as basis for strategies in new international markets.
Copyright Atomic Dog Publishing, 2002
Obstacles to Internationalization • Self-reference Criterion
Conscious and unconscious reference to own national culture while operating in the host country To counter the impact of the self-reference criterion, the corporation must select appropriate personnel for international assignments and engage in sensitivity training
• Government Barriers
Restrictions placed on foreign corporations by imposing tariffs, import quotas, and other limitations, such as restrictive import license awards
Copyright Atomic Dog Publishing, 2002
Obstacles to Internationalization, continued • Barriers Imposed by International Competition
Blocked channels of distribution Exclusive retailer agreements Price reductions at the time of market entry Advertising blitzes
Copyright Atomic Dog Publishing, 2002
Chapter Summary • • •
•
•
International involvement: Domestic marketing, export marketing, international marketing and global marketing Internationalization philosophies: Ethnocentric, polycentric, regiocentric, and geocentric Drivers of international expansion: Competition, regional integration, removal of trade barriers, improvements in transportation, telecommunications and technology, and converging consumer needs Firm-specific drivers: Prolonging product lifecycle, recovering new product development costs, price competition, standardization, economies of scale and cheap labor, experience transfers Obstacles to entry: Self-reference criterion, government barriers, and competitive barriers
Copyright Atomic Dog Publishing, 2002
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